Randy Hunt, local CPA and 5th Barnstable District Massachusetts state representative, regularly posts his points of view regarding local, regional and national issues. (Boring!) But most of the time he just writes humorous stories. No ads. No clutter. Everything is copyrighted by Randy Hunt. To replicate an article, just email for permission.

Sunday, May 24, 2009

Revenue before everything

What would you do if you could unilaterally set your own salary? The only catch would be that your employer could fire you, but only in November of every other year. And… You happen to know that there’s a less than 5% chance your employer would take action against you.

So why wouldn’t you crank up your salary when you let your family budget get out of control? Wallet running low? Shoot a letter over to the payroll manager and bump up your wages by 25%.

Some people might think this scenario is unsustainable. But not our state legislators. They have to make the “tough” decisions. Like which tax to increase.

After sloganeering for a few months with the mantra “Reform Before Revenue,” all bets were off last week when, in a not so surprising reversal, the Massachusetts senate returned to business as usual by voting to raise our state sales tax by 25%. What significant reforms were passed and became law before taking the revenue road? I’m sure you can figure than one out.

State senate president Therese Murray sent out a press release noting that, even after the whopping 25% increase in our sales tax (from 5% to 6.25%), Massachusetts’ sales tax rate is still lower than 30 other states’ “aggregate” rates.

What’s an aggregate rate, you ask? In many states there are local, county and state sales taxes, which add up to a total sales tax rate higher than Massachusetts’ paltry 6.25%. Let’s take Texas as an example of one of the 30 states Murray is referencing:

The Texas state sales tax is 6.25%. It’s a tie. No, because most counties in Texas tack on 0.5% and most cities add an extra 1.5%. If you live in a city, you’re paying 8.25%. Live out in the sticks? 6.75%. So Massachusetts will be cheaper than Texas even after the 25% increase in our sales tax. Right? Wrong. Texas has no income tax. Yet Murray puts Texas on her list of 30 other states with higher aggregate sales tax rates. Factually speaking, she’s right, but she’s comparing apples and oranges—and knows it.

And it goes even further than that. The state senate also voted to allow towns and cities to throw in two percentage points on top of the 6.25% state sales tax on meals and rooms as a “local option.” Now, playing the “Massachusetts is Still Cheaper Than 30 Other States” game, if you buy a steak in Boston and pay 8.25% in meals tax, how exactly is that less than the 8.25% you’d pay in Dallas? Of course, your wallet would already have been lightened by the 5.3% Massachusetts income tax; whereas in Dallas, that wouldn’t be the case.

The residents of Massachusetts, as a whole, do not believe that voters can effect change at the ballot box. After all, we voted to roll back the income tax rate to 5.0%. That didn’t happen. We voted for election reform. That didn’t happen. We voted to allow a tax deduction for charitable donations on our state income tax returns. That didn’t happen.

We didn’t vote, however, to raise the state sales tax rate. That did happen. And without any public hearings or a referendum.

Will anyone in this state recall this “Reform Before Revenue” B.S. when we go to the polls in November 2010? My prediction: Lemmings will carry the day.

4 comments:

If taxes are the answer to our slow economy, it should be to lower them and let the American people stimulate the economy. Government does not need or deserve any additional tax revenue. The well publicized ethical and patronage problems within state government need to be corrected rather than additional taxation of the hard working people of Massachusetts. Sadly, it once again appears the solution to this year’s budget crisis will be to continue the earmarking and pork spending with additional taxes to fund them.

sandy shoes: I can tell you that I did not pay excise tax on our vehicles in Texas, just registration and inspection fees. Also, the city we lived in had real estate taxes split into two parts: municipal and school district. The total (combined) rate as of last fall was $2.52 per thousand.

Mr. Hunt, I liked the comment that was made where a state split tax bills into separate rates for schools. This is truly a great idea. Then we could see houw much is spent for schools and how much is spent for the unimportant items such as fire, police, roads, dumps, personnel, seniors, nursing, you know, those things that are so much less improtant than the children in schools, in a system that needs armed guards. When I went to school, there were no drugs, no police, when a kid was out of line, then his or her parents would take care of things so it would not happen again, there was no haze days for football teams, beatings amongst students in the parking lots, dogs roaming the school to sniff out contraband. Why should my money go to support what is more of a prison than a place of learning. Why should my money go to pay for a position that was being done by someone else last year at 125K less money. Why should I listen to how rude people are at citizen speak sessions when those who make the accuse do not see that the school committee itself is rude to those people speaking.

Yes, we will pay 25% more in sales tax. That is painful, but must be done to banlance the budget, but don't worry, the pain won't go away, when times a great again, and they will be, then we can still pay this increased amount, hae increased local taxes and not save for the next rainy day so that it can be raised to 8%.

As for Mr. Perry, may God bless him, the way he soars like and eagl amongst turkeys.

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I hope I made you smile.

About Me

A certified public accountant for 30 years, Randy has his practice in the beautiful, seaside town of Sandwich, Massachusetts.
Active in many local organizations, Randy is the state representative for the Barnstable & Plymouth District and advocates for conservation of Cape Cod, public safety and independence from foreign energy sources.